News Column

EOG Resources Announces Outstanding Second Quarter 2014 Results

August 7, 2014



ENP Newswire - 07 August 2014

Release date- 06082014 - HOUSTON - EOG Resources, Inc. (NYSE: EOG) today reported second quarter 2014 net income of $706.4 million or $1.29 per share.

This compares to second quarter 2013 net income of $659.7 million, or $1.21 per share.

Adjusted non-GAAP net income for the second quarter 2014 was $796.0 million, or $1.45 per share, and adjusted non-GAAP net income for the same prior year period was $573.8 million, or $1.05 per share.

Consistent with some analysts' practice of matching realizations to settlement months and making certain other adjustments in order to exclude one-time items, adjusted non-GAAP net income for the second quarter 2014 excluded a previously disclosed non-cash net loss of $229.3 million ($147.0 million after-tax, or $0.27per share) on the mark-to-market of financial commodity derivative contracts and net gains on asset dispositions of $3.9 million ($1.7 million net of tax, or $0.01 per share).

During the second quarter 2014, the net cash outflow related to settlements of financial commodity derivative contracts was $86.9 million ($55.7 million after-tax, or $0.10 per share).

For the first half 2014, EOG posted strong financial metrics driven by reinvestment of capital into high rate-of-return drilling opportunities. Discretionary cash flow increased 22 percent and adjusted EBITDAX advanced 24 percent.

In addition, adjusted non-GAAP earnings per share increased 46 percent, compared to the first half 2013.

Dividend Increase

The board of directors increased the cash dividend on the common stock by 34 percent. Effective with the dividend payable October 31, 2014, to holders of record as of October 17, 2014, the board declared a quarterly dividend of $0.1675 per share on the common stock. The indicated annual rate of $0.67 per share represents the 16th increase in 15 years.

'EOG's bottom line is a reflection of our top quality drilling operations and return focused capital investments,' said William R. 'Bill' Thomas, Chairman and Chief Executive Officer. 'Because EOG has demonstrated its ability to sustain crude oil growth and reinvest cash flows in high return assets, we've increased the common stock dividend for the second time this year, enhancing long-term value for our stockholders.'

Operational Highlights

In the U.S., crude oil and condensate production increased 33 percent in the second quarter 2014, compared to the same prior year period. Production gains from the South Texas Eagle Ford and North Dakota Bakken led EOG's U.S. crude oil production growth.

Driven by the South Texas Eagle Ford and the Permian Basin, natural gas liquids (NGLs) production increased 22 percent, compared to the second quarter 2013. Natural gas production slightly increased due to EOG's Trinidad operations and strong associated gas production in the U.S. Overall, total company production increased 17 percent.

Delaware Basin

EOG expanded its inventory of crude oil plays with successful drilling results in the Second Bone Spring Sand, which underlies its extensive Leonard Shale acreage position in Lea and Eddy counties, New Mexico. Through the application of advanced completion techniques, EOG realized robust results from two recent wells. The Mars 3 State #1H, in which EOG has 67 percent working interest, came online at 1,270 barrels of oil per day (Bopd) with 150 barrels per day (Bpd) of NGLs and 1.1 million cubic feet per day (MMcfd) of natural gas.

EOG has 100 percent working interest in the Jolly Roger 16 State #1H, which had an initial production rate of 1,450 Bopd with 210 Bpd of NGLs and 1.5 MMcfd of natural gas. While EOG estimates the play may be prospective over the majority of its 73,000 net Leonard acres, evaluation and confirmation is ongoing.

Across the Second Bone Spring Sand, EOG's production mix is estimated to be approximately 70 percent crude oil with average estimated gross reserves per well of 500 thousand barrels of oil equivalent. Plans are to drill several more wells in the Second Bone Spring Sand in 2014 and increase activity in 2015.

In the West Texas and southeast New Mexico Leonard Shale play, EOG continues to enhance completions and test well spacing both within and across zones to maximize recovery of the hydrocarbons in place.

Over the last 12 months, EOG has systematically tightened spacing from 660 to 300 feet between wells to test production interference between Leonard 'A' wells. InLea County, EOG completed a 500-foot spacing test by drilling the Dragon 36 State #05H, #06H, #07H and #08H. The wells were turned to production at initial rates of 1,100, 1,500, 1,270 and 1,360 Bopd, respectively. EOG has 100 percent working interest in these Leonard 'A' zone wells that had associated NGL production of 200, 195, 235 and 235 Bpd and 1.1, 1.1, 1.3 and 1.3 MMcfd of natural gas, respectively.

The most recent successful pilot in Loving County is a three-well pattern, also in the Leonard 'A' zone. The Gemini #1H, #2H and #3H were drilled 300 feet apart and turned to production at initial rates of 1,120, 1,530 and 1,290 Bopd, respectively. These Leonard 'A' zone wells, in which EOG has 48 percent, 100 percent and 48 percent working interest, respectively, had associated NGL production of 185, 220 and 200 Bpd and 1.0, 1.2 and 1.1 MMcfd of natural gas, respectively.

In addition, EOG has completed two strong Leonard 'B' zone wells, one drilled as part of a two-well pattern offsetting an 'A' zone well. In Lea County, the Falcon 25 Fed #2H began sales from the 'B' zone at 920 Bopd with 120 Bpd of NGLs and 660 thousand cubic feet per day (Mcfd) of natural gas. In Loving County, the Mercury State #2H also was completed in the 'B' zone, flowing 1,630 Bopd with 230 Bpd of NGLs and 1.3 MMcfd of natural gas.

Offsetting the Mercury State #2H by 250 feet, the Mercury State #1H was completed in the 'A' zone at 1,700 Bopd with 360 Bpd of NGLs and 2.0 MMcfd of natural gas. EOG has 100 percent working interest in these three wells. Positive initial results from the Falcon 25 Fed #2H and the Mercury State #2H wells support additional downspacing tests of the Leonard 'B' zone.

Using early production results from the tightly spaced Gemini 'A' zone wells and the Mercury State wells drilled across zones 'A' and 'B', EOG is evaluating various downspacing options that could significantly increase the number of drilling locations across its Leonard acreage.

'The Second Bone Spring Sand is yet another example of how EOG organically increases its high return crude oil inventory. Its potential, combined with downspacing results from the Leonard Shale play, positions EOG for steady long-term exploration and development activity in the Delaware Basin. We have the momentum to unlock additional high rate-of-return growth from EOG's oil-rich acreage for years to come,' Thomas said.

In Reeves County, Texas, EOG reported a number of successful wells from its 134,000 net acre position in the Delaware Basin Wolfcamp play. The State Apache 57 #1103H, #1104H, #1105H and #1107H were completed at initial rates ranging from 590 to 1,600 Bopd with 200 to 460 Bpd of NGLs and 1.3 to 3.0 MMcfd of natural gas.

Also in Reeves County, the State Harrison Ranch 56 #302H and #303H began sales at 660 and 665 Bopd with 275 and 450 Bpd of NGLs and 1.8 and 2.9 MMcfd of natural gas, respectively. EOG has 100 percent working interest in these six wells. EOG continues to test various well spacing patterns and zones on its DelawareBasin Wolfcamp acreage.

Eagle Ford

EOG's South Texas Eagle Ford crude oil play again contributed significantly to total company second quarter crude oil production growth. Associated NGL and natural gas production also contributed to total company growth. Maintaining a robust drilling and completion program across its Eagle Ford acreage, EOG is further improving individual well results by modifying completion techniques and reducing drilling days.

In Karnes County, the McCoy Unit #1H and #2H began production at 5,290 and 5,415 Bopd with 475 and 415 Bpd of NGLs and 2.7 and 2.4 MMcfd of natural gas, respectively. EOG has 90 percent working interest in these wells. The Wolf Unit #6H, #7H, #8H and #9H, in which EOG has 100 percent working interest, began sales at rates ranging from 3,160 to 3,600 Bopd with 310 to 390 Bpd of NGLs and 1.8 to 2.3 MMcfd of natural gas.

Northeast of Karnes in DeWitt County, the Justiss Unit #11H, #12H and #13H had initial production rates of 4,000, 3,900 and 4,130 Bopd with 690, 650 and 750 Bpd of NGLs and 4.0, 3.8 and 4.3 MMcfd of natural gas, respectively. EOG has 100 percent working interest in these three wells.

In Gonzales County, EOG recorded a number of wells with robust initial production including the Boothe Unit #11H and #16H, which had rates of 4,570 and 3,245 Bopd with 580 and 500 Bpd of NGLs and 3.4 and 2.9 MMcfd of natural gas, respectively. The Zimmerman Unit #14H began sales at 3,800 Bopd with 350 Bpd of NGLs and 2.0 MMcfd of natural gas. EOG has 100 percent working interest in these three wells.

Southwest of Gonzales in LaSalle County, the Naylor Jones Unit 127 #1H, #2H and #3H had initial production rates ranging from 2,200 to 2,500 Bopd with 220 to 250 Bpd of NGLs and 1.3 to 1.5 MMcfd of natural gas. EOG has 100 percent, 100 percent and 75 percent working interest in these wells, respectively.

North Dakota Bakken

In the North Dakota Bakken, EOG is concentrating activity on its Core acreage in Mountrail County. Well productivity is improving markedly due to continued refinements in completion designs. Three Core wells, the Wayzetta 43-0311H, 44-0311H and 45-0311H, were completed during the second quarter at 1,505, 2,410 and 2,690 Bopd, respectively. EOG has 75 percent working interest in these wells.

EOG continues to drill and evaluate production data from various spacing patterns in order to maximize the value of this asset. In addition, EOG plans to drill several Three Forks wells to test various benches of this play on both its Core and Antelope Extension acreage during the remainder of 2014.

Wyoming

In the Wyoming DJ Basin, EOG is simultaneously developing the stacked Codell and Niobrara formations from multi-well pad locations in Laramie County, Wyoming. During the second quarter, the Jubilee 586-1705H, the second well completed from a multi-well pad, began production from the Codell at an initial rate of 1,145 Bopd with 445 Mcfd of rich natural gas. EOG has 75 percent working interest in the well.

A number of wells are targeted to begin production in August through year-end. EOG plans to test well spacing patterns and various completion techniques in both the Codell and Niobrara formations. EOG has increased its acreage position in the Codell by 13,000 net acres to 85,000 net acres.

In the Wyoming Powder River Basin, EOG is maintaining a steady drilling program with denser pad drilling operations. In the Parkman play, the Mary's Draw 404-21H and 468-34H, which were drilled from the same pad, had initial production rates of 1,045 and 980 Bopd with 305 and 330 Mcfd of rich natural gas, respectively. EOG has 99 percent and 100 percent working interest in the wells, respectively.

'To summarize our position, EOG is extending its lead as the largest crude oil producer in the onshore U.S. Lower 48. We continue to grow the size and quality of our drilling inventory by generating excellent new plays internally and increasing the drilling potential of our existing plays,' Thomas said. 'EOG is leading its peers in terms of barrels per day of crude oil growth, while our forecast ROE and ROCE metrics exceed the average of all upstream energy sectors, including the majors.'

Crude Oil and Natural Gas Hedging Activity

For the period August 1 through December 31, 2014, EOG has crude oil financial price swap contracts in place for 194,000 Bopd at a weighted average price of$96.19 per barrel. For the calendar year 2015, EOG has no crude oil financial derivative contracts in place, excluding unexercised options.

For the period September 1 through December 31, 2014, EOG has natural gas financial price swap contracts in place for 330,000 million British thermal units per day (MMBtud) at a weighted average price of $4.55 per million British thermal units (MMBtu), excluding unexercised options.

For the period January 1 through December 31, 2015, EOG has natural gas financial price swap contracts in place for 175,000 MMBtud at a weighted average price of$4.51 per MMBtu, excluding unexercised options.

Cash Flow and Capital Structure

At June 30, 2014, EOG's total debt outstanding was $5,910 million for a debt-to-total capitalization ratio of 26 percent. Taking into account cash on the balance sheet of $1.2 billion at June 30, EOG's net debt was $4,680 million for a net debt-to-total capitalization ratio of 22 percent.

EOG is targeting 29 percent total company crude oil production growth in 2014. Total company production is expected to rise 14 percent, an increase from the previous 12 percent estimate. Capital expenditures are anticipated to range from $8.1 billion to $8.3 billion for 2014, unchanged from prior estimates.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, including, among others, statements and projections regarding EOG's future financial position, operations, performance, business strategy, returns, budgets, reserves, levels of production and costs, statements regarding future commodity prices and statements regarding the plans and objectives of EOG's management for future operations, are forward-looking statements.

EOG typically uses words such as 'expect,' 'anticipate,' 'estimate,' 'project,' 'strategy,' 'intend,' 'plan,' 'target,' 'goal,' 'may,' 'will,' 'should' and 'believe' or the negative of those terms or other variations or comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning EOG's future operating results and returns or EOG's ability to replace or increase reserves, increase production, generate income or cash flows or pay dividends are forward-looking statements.

Forward-looking statements are not guarantees of performance. Although EOG believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct.

Moreover, EOG's forward-looking statements may be affected by known, unknown or currently unforeseen risks, events or circumstances that may be outside EOG's control. Important factors that could cause EOG's actual results to differ materially from the expectations reflected in EOG's forward-looking statements include, among others:

the timing and extent of changes in prices for, and demand for, crude oil and condensate, natural gas liquids, natural gas and related commodities;

the extent to which EOG is successful in its efforts to acquire or discover additional reserves;

the extent to which EOG is successful in its efforts to economically develop its acreage in, produce reserves and achieve anticipated production levels from, and optimize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects;

the extent to which EOG is successful in its efforts to market its crude oil, natural gas and related commodity production;

the availability, proximity and capacity of, and costs associated with, appropriate gathering, processing, compression, transportation and refining facilities;

the availability, cost, terms and timing of issuance or execution of, and competition for, mineral licenses and leases and governmental and other permits and rights-of-way, and EOG's ability to retain mineral licenses and leases;

the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations; environmental, health and safety laws and regulations relating to air emissions, disposal of produced water, drilling fluids and other wastes, hydraulic fracturing and access to and use of water; laws and regulations imposing conditions or restrictions on drilling and completion operations and on the transportation of crude oil and natural gas; laws and regulations with respect to derivatives and hedging activities and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;

EOG's ability to effectively integrate acquired crude oil and natural gas properties into its operations, fully identify existing and potential problems with respect to such properties and accurately estimate reserves, production and costs with respect to such properties;

the extent to which EOG's third-party-operated crude oil and natural gas properties are operated successfully and economically;

competition in the oil and gas exploration and production industry for employees and other personnel, facilities, equipment, materials and services;

the availability and cost of employees and other personnel, facilities, equipment, materials (such as water) and services;

the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise;

weather, including its impact on crude oil and natural gas demand, and weather-related delays in drilling and in the installation and operation (by EOG or third parties) of production, gathering, processing, refining, compression and transportation facilities;

the ability of EOG's customers and other contractual counterparties to satisfy their obligations to EOG and, related thereto, to access the credit and capital markets to obtain financing needed to satisfy their obligations to EOG;

EOG's ability to access the commercial paper market and other credit and capital markets to obtain financing on terms it deems acceptable, if at all, and to otherwise satisfy its capital expenditure requirements;

the extent and effect of any hedging activities engaged in by EOG;

the timing and extent of changes in foreign currency exchange rates, interest rates, inflation rates, global and domestic financial market conditions and global and domestic general economic conditions;

political conditions and developments around the world (such as political instability and armed conflict), including in the areas in which EOG operates;

the use of competing energy sources and the development of alternative energy sources;

the extent to which EOG incurs uninsured losses and liabilities or losses and liabilities in excess of its insurance coverage;

acts of war and terrorism and responses to these acts;

physical, electronic and cyber security breaches and

the other factors described under Item 1A, 'Risk Factors', on pages 17 through 26 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and any updates to those factors set forth in EOG's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur, and, if any of such events do, we may not have anticipated the timing of their occurrence or the extent of their impact on our actual results. Accordingly, you should not place any undue reliance on any of EOG's forward-looking statements.

EOG's forward-looking statements speak only as of the date made, and EOG undertakes no obligation, other than as required by applicable law, to update or revise its forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.

The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose not only 'proved' reserves (i.e., quantities of oil and gas that are estimated to be recoverable with a high degree of confidence), but also 'probable' reserves (i.e., quantities of oil and gas that are as likely as not to be recovered) as well as 'possible' reserves (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves).

As noted above, statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include 'potential' reserves and/or other estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines.

Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov.

Investor Contact:

Maire A. Baldwin

Tel: (713) 651-6364

Kimberly A. Matthews

Tel: (713) 571-4676

David J. Streit

Tel: (713) 571-4902

Media Contact:

K Leonard

Tel: (713) 571-3870


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Source: ENP Newswire


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